START UP MONEY
You've Got a Great Idea, a Prototype, and You're Ready to License or Manufacture Your Product. But Where Do You Get the Money?
By Ken Tarlow
Let's face it. Even after developing an idea and a prototype, you'll need money to approach companies or manufacturers. Raising money in the early stages is just as important as it is later on. The early stages, in fact, are relatively inexpensive and you should be able to raise this money through family and friends.
But the early stages are also the most risky, so the investors deserve a healthy share of the return. If you plan to license your product, I recommend that you split the royalty 50/50 with your investors. You do the work (sweat) and they put in the money.
If you manufacture the product yourself, I recommend that you give your investors the equivalent of one-half the royalty. A good royalty amount is five percent of the wholesale selling price, so two and a half percent of the wholesale selling price would be one-half the royalty. That's a good deal for you and them.
But to attract investors to your idea, you need a mini-business plan to demonstrate that you've done at least some minimal research on the product's viability. That minimum research includes:
* Information on the market possibilities and the demographics of those who would buy the product.* A preliminary patent search to be certain you could manufacture or license the product without infringement.
* A detailed drawing of the product which demonstrates appearance and function.
* Preliminary pricing information.
If you do these yourself--and you can--it will cost you nothing. If you wish to pay for patent services, a preliminary search will cost around $150. If you need someone to do a good drawing, it may cost between $100 and $500.
Once you've assembled this information, you can write a mini-business plan, which will help attract money to your idea. We'll share the details of that plan in our next issue.
The above article was excerpted from Tarlow's MIND TO MONEY, a cassette tape/workbook package that can help you develop a new product from the idea stage to the marketplace. MIND TO MONEY may be ordered from the Dream Merchant at $59.95 plus $4.95 CA sales tax and $5 shipping and handling ($69.90 total). Send orders to the Dream Merchant, 2309 Torrance Blvd., Suite 104, Torrance, CA 90501.
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